analysis of project costs for green buildings in the uae a ...analysis of project costs for green...

Analysis of Project Costs for Green Buildings in

the UAE – A Case Study

تحليل تكاليف مشاريع المباني الخضراء في دولة اإلمارات العربية

المتحدة - دراسة حالة

By

Student Name: Sultan Zaal .S Al-Ali

Student ID Number 2013103166

Dissertation submitted in partial fulfilment of

MSc in Project Management

Faculty of Business

Dissertation Supervisor

Dr. Paul

Sep, 2014

Analysis of Project Costs for Green Buildings

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DISSERTATION RELEASE FORM Student Name

Sultan Zaal Al Ali Student ID

2013103166

Programme

PM

Date

19-Oct-2014

Title

Analysis of Project Costs for Green Buildings in the UAE – A Case

Study

I warrant that the content of this dissertation is the direct result of my own work and that any use made

in it of published or unpublished copyright material falls within the limits permitted by international copyright conventions.

I understand that one copy of my dissertation will be deposited in the University Library for permanent retention.

I hereby agree that the material mentioned above for which I am author and copyright holder may be copied and distributed by The British University in Dubai for the purposes of research, private study or education and that The British University in Dubai may recover from purchasers the costs incurred in such copying and distribution, where appropriate.

I understand that The British University in Dubai may make that copy available in digital format if appropriate.

I understand that I may apply to the University to retain the right to withhold or to restrict access to my

dissertation for a period which shall not normally exceed four calendar years from the congregation at which the degree is conferred, the length of the period to be specified in the application, together with the precise reasons for making that application.

Signature


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Abstract

Green buildings, or as they are sometimes called, ‘Sustainable Buildings,’ or ‘High Performing

Buildings,’ are buildings which aim to fulfill occupant or user’ needs and still be efficient in

using power, water and other resources. They also help to protect the well being and health of

occupants and users, while reducing the waste, pollution, and environmental impact.

Governments are being challenged to reduce their carbon footprint in a stepped approach by a

specified timeline. Information on global energy provided in a commissioned report by the

International Energy Agency (IEA), revealed that existing buildings of all types, consume

above 40% of all power consumption, globally, and at the same time, create more than a

quarter of the total carbon emissions throughout the world (Howe 2010). The seriousness of

these findings and others, have led some governments to take strong measures to reduce the

energy and natural resource consumption of buildings, along with their environmental impacts.

One of the ways they have attempted to do this has been by using more rigorous approaches in

the development and adoption of ‘green building’ standards for their building projects.

However, one of the barriers hindering other governments adopting sustainable building codes

and practices is the issue of ‘cost.’ The general perception of green buildings is that they cost

considerably more to design and construct than conventional buildings (buildings that have not

incorporated sustainable features throughout their design and construction). The important

question, therefore, is, ‘are these claims that green buildings cost more and require more initial

investment, actually true?’ And if so, by how much?

From the literature review, there was a general agreement that green buildings are more

environmental friendly than the conventional ones. Green buildings also outperform

conventional buildings on many aspects such as operational cost saving, indoor air quality,

lower energy and water consumption and better productivity. However, there have been many

studies into the concept of cost premium of green buildings. Some of these studies have

supported the ‘higher cost premium’ viewpoint, while others have refuted it. This has lead to a

great deal of confusion among developers, government bodies and other relevant parties

investigating or involved in the implementation of green initiatives.

In order to support or reject any of these studies, there is a very real need to conduct a proper,

controlled study approach to determine the true additional cost green buildings will incur over

and above conventional ones, if any. For this study the cost premium of green buildings in the

UAE will be examined and analyzed in comparison to conventional ones. Therefore two

methods have been used:

Method 1: Cost Comparative Approach

Two recent green buildings will be compared with two similar conventional buildings in terms

of construction cost per square meter at a shell and core level. The comparison will include:

HVAC (but will exclude air conditioning as the green buildings are connected to a centralized

district cooling plant), completion of associated public spaces, and above or underground

parking spaces. This comparative study will exclude the design fee, land price and finishing

items.


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Method 2: Interviewing all key stakeholders of the Masdar Headquarters Building project as a

case study to understand the different cost elements of green buildings and to identify the

practices that have been adopted to ensure the cost effectiveness of green buildings.

The outcome of the first method, it was evident that green buildings were not necessarily more

expensive than conventional ones at the core and shell level. Any cost premium therefore could

be attributed to other factors such as the meeting of client requirements on the finishing level,

or the technology, which was installed and used, regardless of whether the building was green

or conventional.

From the analysis of the feedback from interviewee, it was clear that sustainable buildings

don’t necessarily require any additional investment compared to conventional ones If they

done properly, as the cost driver is related primarily to the client’s specifications and the

subsequent design, rather than sustainable elements. What was evident that a green building

project team needs to work in an integrated way, particularly during the design stage, to control

the overall project cost.


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ملخص

احتياجات تحقق التي المباني هي األداء" عالية "المباني أو المستدامة" "المباني أحيانا تسمى كما أو الخضراء المباني

البيئي. التلوث من الحد مع األخرى والموارد والمياه الطاقة استخدام في أفضل كفاءة وفق المستخدمين

أنواعها بكافة المباني من ناتجة العالمية الطاقة استهالك من ٪04 من رأكث أن في العالمية الطاقة منظمة عن المعلومات تفيد

خطورة أن (.0404 )هاو العالم أنحاء جميع في الكربون انبعاثات إجمالي ربع من أكثر المباني هذه تنتج نفسه الوقت وفي

للمشاريع الطبيعية والموارد قةالطا استهالك من للحد قوية تدابير اتخاذ على الحكومات ببعض أدت وغيرها النتائج هذه

المشاريع. لكافة الخضراء" "المباني معايير واعتماد المباني تطوير مجال في صرامة أكثر نهج باستخدام

حيث "التكلفة" بسبب المعايير هذه تطبيق في التحديات من الكثير تواجه الحكومات من كثير تزال ال النتائج هذه من بالرغم

االدعادات هذه هل هو المهم السؤال التقليدية. المباني من بكثير أكثر تكلف الخضراء المباني أن في عام تصور هناك إن

التكلفة؟ هذه تبلغ كم كذلك، األمر كان وإن صحيحة؟

كما التقليدية. تلك من استدامة أكثر الخضراء المباني أن في عام اتفاق هناك يوجد السابقة، الدراسات استعراض خالل من

و التشغيلية، التكاليف توفير في مثال الجوانب: من العديد في التقليدية المباني من أفضل الخضراء المباني أن علي اتفاق وجدي

المباني تكلفة موضوع في االختالفات من العديد هناك توجد هذا مع والمياه. الطاقة استهالك في و الداخلي، الهواء جودة في

البعض نفى حين في التقليدية، المباني من أكثر تكلف الخضراء المباني أن في الدراسات ههذ بعض أفادت حيث الخضراء،

واألطراف الحكومية والهيئات المطورين بين االرتباك من كبير قدر خلق الى أدى النتائج في االختالف هذا ذلك. اآلخر

الخضراء. المبادرات تنفيذ في الصلة ذات األخرى

للمباني اإلضافية التكاليف لتحديد عملية دراسة إلجراء حقيقية حاجة هناك كانت الدراسات هذه من يأ رفض أو دعم أجل من

المتحدة العربية اإلمارات دولة في الخضراء المباني تكلفة فحص يتم سوف الدراسة هذه في لذلك وجدت. إن الخضراء

طريقتين: باستخدام وذلك التقليدية تلك مع بالمقارنة وتحليلها

المربع للمتر التكلفة مقارنة :0 طريقة

أعمال بدون المربع للمتر البناء تكلفة حيث من المماثلة التقليدية المباني من اثنين مع الخضراء المباني من اثنين مقارنة سيتم

المقارنة. هذه من األراضي وأسعار التصميم رسوم استبعاد سيم كما التشطيبات.

المبنى في المختلفة التكلفة عناصر لفهم حالة كدراسة مصدر مقر مبنى مشروع في الرئيسيين العاملين جميع مقابلة :0 طريقة

للمشروع. أقل تكلفة لضمان اعتمادها تم التي الممارسات على للتعرف و

األضافية التكاليف أن و التقليدية لكت من تكلفة أكثر بالضرورة ليست الخضراء المباني أن في األول األسلوب نتائج تشير

أو مستدام المبنى كان إذا عما النظر بغض التكنولوجيا أو التشطيبات مستوى على المالكين متطلبات إلى تعزى أن يمكن

تقليديي.

لبتتط ال المستدامة المباني أن استنتاج يمكن مصدر مقر مبنى مشروع في الرئيسيين العاملين فعل ردود تحليل من

التصميم. مرحلة خالل سيما وال صحيح بشكل تمت إذا التقليدية تلك مع مقارنة إضافية استثمارات أي بالضرورة


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Acknowledgements

I would like to express my deepest gratitude to my academic and research advisor Professor

Paul Gardiner and Professor Mohammed Al Dulaimi for their guidance and constant support in

helping me to conduct and complete this work. I would also like to thank Professor Bassam

AbuHijleh for his encouragement and his expertise. In addition, I want to thank Mr. Chris Wan

from Masdar City for his generous advice. I am indebted to all the Masdar City Team for

supporting this work and for providing research facilities.

I also owe my sincere appreciation to my family and relatives who have supported and

encouraged me over the years of this research study.


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Table of Contents

Abstract ............................................................................................................................. 2

Acknowledgements ............................................................................................................ 5

Acronyms ........................................................................................................................... 9

List of Figures ....................................................................................................................10

List of Tables .....................................................................................................................11

1- Introduction ..................................................................................................................12 1.1- The Research Problem ........................................................................................................................................... 12 1.2- The Research Objectives ........................................................................................................................................ 12

2- Literature Review ..........................................................................................................12 2.1- General Overview ..................................................................................................................................................... 13 2.2- Background on Green Projects ........................................................................................................................... 13 2.3- Current Perception of Green Buildings ........................................................................................................... 13 2.4- Benefits of Green Buildings .................................................................................................................................. 15 2.5- The Performance of Green Buildings ............................................................................................................... 16 2.6- The Cost Premium of Green Buildings ............................................................................................................. 18

2.6.1- Background of Green Buildings Cost Premium ........................................................................................... 19 2.6.2- Cost Determining Techniques .............................................................................................................................. 20

2.7- Cost Comparison of Green Buildings ................................................................................................................ 21 2.7.1- Cost Premium Compared to Conventional Buildings ................................................................................ 22 2.7.1a Cost Analysis of Academic Buildings ............................................................................................................... 22 2.7.1b Cost Analysis of Laboratory Buildings ............................................................................................................ 23 2.7.1c Cost Analysis of Library Buildings .................................................................................................................... 24 2.7.2- Cost Premium of Different Green Certification Levels .............................................................................. 25

2.8- Soft Costs of Green Buildings ............................................................................................................................... 28 2.9- Factors that could Influence the Cost of Green Buildings ........................................................................ 29

3- Conceptual Framework ..................................................................................................32 3.1- Introduction ................................................................................................................................................................ 32 3.2- Study Motivation ....................................................................................................................................................... 32

4- Sustainability in the UAE ................................................................................................33

5- Methodology .................................................................................................................35 5.1- Method One: Cost comparison ............................................................................................................................ 35

5.1.1. Findings .......................................................................................................................................................................... 36 5.1.2. Limitations .................................................................................................................................................................... 37

5.2- Method Two: Case Study: Masdar Headquarters Building ...................................................................... 37 5.2.1- Research Approach ................................................................................................................................................... 37 5.2.2- Masdar Headquarters ............................................................................................................................................. 39

5.2.2.1- General Overview ........................................................................................................................................................ 39 5.2.2.2- Project Goals and Objectives ................................................................................................................................... 39 5.2.2.3- Management Strategies ............................................................................................................................................. 39 5.2.2.4- Design Strategies .......................................................................................................................................................... 41

5.2.3- Sample Analysis and Data Collection ............................................................................................................... 43 5.2.4- Discussion ...................................................................................................................................................................... 43 5.2.5- Limitations ................................................................................................................................................................... 47

6- Conclusions and Recommendations ...............................................................................47


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6.1 Conclusions ................................................................................................................................................................... 47 6.2- Recommendations.................................................................................................................................................... 52

Bibliography ......................................................................................................................52


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Acronyms

AHU Air Handling Unit

ASHRAE American Society of Heating, Refrigerating, and Air Conditioning Engineers

ASTM American Society for Testing and Materials

BEPAC Building Environmental Performance Assessment Criteria – Canada

BRE Building Research Establishment

BREEAM The British Research Establishment Environmental Assessment Method

CEMP Construction Environmental Management Plan

DAT Decision Audit Trail

DOT Department of Transport – Abu Dhabi

FCU Fan Coil Unit

GRC Glass Fibre Reinforced (cement)

GSA US General Services Administration

HK-BEAM Hong Kong Building Environmental Assessment Method

IEA The International Energy Agency

IRR Internal Rate of Returns

OPL One Planet Living principle

LEED. Leadership in Energy and Environmental Design

LEED AP Accredited Professionals

MMC Modern Methods of Construction

NPV Net Present Value

PBRS Pearl Building Rating System

PCC Per Capita Consumption

PQP Pearls Qualified Professional

PVRS Pearl Villa Rating System

STMP Abu Dhabi Surface Transport Master Plan

TSE Treated Sewage Effluent

UPC Abu Dhabi Urban Planning Council American

USGBC United States Green Building Council

VOC Volatile Organic Compound


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List of Figures

Figure 1: Expectation about sustainable project costs…………….……………………..12

Figure 2: Reviewed Whole Project Cost Model…………………………………………12

Figure 3: Performance Comparison between Green and Conventional Buildings………14

Figure 4: Cost Analysis of Academic Buildings………………………………………...21

Figure 5: Cost Analysis of Laboratory Buildings………………………………………..22

Figure 6: Cost Analysis of Library Buildings....................................................................23

Figure 7: Cost of LEED Certified Buildings......................................................................24

Figure 8: Average Green Premium vs. Level of Green Certifications…...........................25

Figure 9: Architecture for the best performing ANN Model…………….........................29

Figure 10: Conceptual Framework………………………………………………………...30

Figure 11: Calculation based on World Bank Indicators……………………...…………..32


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List of Tables

Table 1: Obstacles encountered during green building project management…........................27

Table 2: The data description of the 74 LEED-NC certified buildings in USA….....................29

Table 3: Cost Comparison between Two Green Buildings and Two Conventional ones……..34

Table 3: Decision making model ……………………………………………………………..38


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1- Introduction

Buildings can be viewed as living creatures, where they consume water, energy and other

resources, and produce waste and pollutants as a result. They can also have a negative impact

on, not only their surrounding environment, but also on the people who occupy or use them.

However, buildings can be designed, built and operated to do the opposite of this, or at least, to

consume less resources and produce less waste. These buildings have come to be known as,

‘Green,’ ‘Sustainable,’ or ‘High Performance’ Buildings. Resource conservation and waste

reduction are not their only aims, but equally important are the health and well being of the

building users and occupants, along with its external environment.

International research studies have produced some alarming results concerning the energy

consumption of buildings worldwide and their carbon emissions. Consequently, various

governments are working to stage the development and implementation of greener building

standards, and to incentivise developers who are voluntarily, adopting new sustainable

measures.

Unfortunately, one major obstacle that inhibits the adoption of green building standards and

practices, both at the governmental level in some countries, and particularly in the private

sector, is the issue of ‘cost.’ Various claims are made in the marketplace concerning the degree

of cost differentiation between green buildings and conventional ones, that is, those built

without sustainable components.

1.1- The Research Problem

There is general agreement regarding the long-term beneficial effects of green buildings.

However, there still appears to be greater concern about the cost premium of green buildings.

There have been many studies conducted to investigate and identify the long-term commercial

and environmental benefits of green buildings, but there has been less research undertaken, to

determine just how much additional investment is actually required to design and construct a

green building compared to a conventional one. As a result, the main focus of this thesis study

will be on the initial investment costs at the design and construction stages of green buildings

in comparison with conventional ones, rather than the long term financial benefits.

1.2- The Research Objectives

• Investigate the challenges facing the construction industry to deliver green buildings.

• Compare and contrast the key elements of green buildings that contribute to increased cost

compared with conventional buildings.

• Examine the critical factors and issues influencing cost of designing and constructing green

buildings.

2- Literature Review


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2.1- General Overview

Population in cities is expected to double to a figure of six billion by the year 2050 according

to Macomber (2003). This, in turn, will place a greater burden on the resources of the already

overcrowded cities around the world. Shortages in power supply, clean water, and other

necessary resources are a constant concern to governments, especially in developing countries

where lack of investment capital and management capabilities exist.

In 2010, The International Energy Agency (IEA), which is an intergovernmental organization,

was mandated to produce a report to assess oil supply disruption and provide information on

the global energy sector. The IEA presented many interesting facts to the world’s leaders.

Some of these findings were that the existing buildings, of all types (residential, commercial,

governmental, industrial, etc.) consume above 40% of all power consumption, globally, and at

the same time, create more than a quarter of the total carbon emissions throughout the world

(Howe 2010). The seriousness of these findings led many governments to take strong measures

to reduce the rate of growth in power consumption, and the environmental impacts of

buildings, by using more rigorous approaches in the development and adoption of green

building standards for their future building projects (EPA 2013).

Water is another major challenge facing most governments. Clean water is increasingly in

short supply around the world. Macomber (2013) raises the important concern that nearly half

the global population lives in areas where water is scarce, or where there are limited means to

collect, purify and distribute it. He highlights this issue in his article on The big idea: Building

sustainable cities, where he states that if present trends in water consumption continue, by

2030, water demand will exceed the current supply by 40%.

2.2- Background on Green Projects

The philosophy of green buildings can be tracked back to the previous millennia when the

Anasazi used local materials and passive designs to build their entire village so that all houses

could receive solar heat in the winter. However in the modern age, the impetus for sustainable

building designs was initially triggered as a result of the 1970 oil crisis, which forced

governments to improve their energy efficiency and search for other ways to harness other

forms of energy, such as from the sun and wind (EPA 2013).

Despite the existence of the concept and application of sustainability in relation to the design

and construction of various dwellings, the term, “green architecture” and “green building” was

first introduced by the British publication, The Independent, in London, in early 1990. This

was followed by the Americans who used the same terms for the first time on the editor’s page

of Architecture magazine in the mid of 1990.

In 1991, The American Institute of Architect’s Committee on the Environment was

established, and in the same year, the first green building program began in the US, in the city

of Austin. This program has been followed by many more throughout the United States.

Additionally, The Green Building Committee of the American Society for Testing and

Materials (ASTM) was also formed in 1991 (Kats, et al. 2003).

2.3- Current Perception of Green Buildings

In a study conducted by Annie Pearce in 2007 under the name, "Sustainable Capital Projects:


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Leapfrogging the first cost barrier," Pearce explained that the greatest level of resistance to

green buildings is the perception of cost that most people have. Pearce highlighted the fact that

there have been many studies into the concept of cost premium of green buildings. Some of

these studies have supported the ‘higher cost premium’ viewpoint, while others have refuted it.

This has lead to a great deal of confusion among developers, government bodies and other

relevant parties investigating or involved in the implementation of green initiatives.

Pearce pointed out that most of the costs involved in green projects are perceived over a two-

dimensional grid as per the figure below. It appears that most decision makers will make a

tradeoff between the first cost of green projects and their life cycle costs depending on the exit

strategy, that is, whether they will lease the building or sell it (Pearce 2007).

Figure 1: Expectations about sustainable project costs

The problem with the two dimensional analysis is that it is based on the general perception by

most people that green buildings cost more at their beginning stages than conventional ones.

Additionally, it supports the idea that green buildings will always save more on operational and

maintenance costs compared to conventional constructions.

Pearce (2007) debated that to understand the costs and benefits of green buildings versus

conventional buildings, an additional dimension should be added to the above grid.

Figure 2: Revised Whole Project Cost Model

This third dimension will consist of three layers:

1- Traditionally considered quantifiable costs (these costs include such considerations as site


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acquisition, design, management, maintenance and repair).

2- Non traditional quantifiable costs (these costs can be quantified but they do not necessarily

affect the decision making, such as record keeping, monitoring, quality assurance, etc.).

3- Qualitative costs (these costs have a real impact but are hard to quantify because of their

social values and other measurability challenges).

Despite the difficulties in quantifying the qualitative costs, this last layer is where green

buildings generally outweigh conventional ones in regards to costs and benefits. This layer can

be further broken down into internal costs and external costs. The internal costs can benefit the

decision makers such as increased productivity of employees, improvements in the indoor air

quality, and an enhanced public image. At the same time, the impact of the external costs can

usually be seen on a broader scale within society such as a reduction in ecosystem degradation,

biodiversity loss and global warming (Pearce 2007).

2.4- Benefits of Green Buildings

There is a considerable amount of literature that has been written on the benefits of green

buildings. Not only have these included the reduction of the operational costs (tangible

benefits), but also improvements in the quality of lighting, ventilation, and air within the

buildings (intangible benefits).

The issue of the cost and the benefits of green buildings is not just a modern day concern. An example of this can be traced back to 1986 when the Rocky Mountain Institute (RMI) published a study (no author) where several buildings, which had made various retrofits, were examined. (Building Design & Construction 2003).

This study examined the post office in Reno that did a lighting retrofit. It found that the

lighting power consumption was reduced by 69% and that the cost savings repaid the

investment cost of the retrofitting within only six years. This study was not limited to old

buildings only, as some newly constructed buildings showed promising results too. The

Lockheed Building 157, which was completed in 1983, produced energy savings of $500,000 a

year with a four-year payback.

The ING Bank Headquarters in Amsterdam, in 1987, achieved an annual energy savings of

$2.6 million at the retrofit cost of only $700,000, which translated into a 3-month payback

period. The design of the West Bent Mutual Insurance Company’s headquarters in 1992

produced a 40% savings per square foot in electricity costs. In this study, RMI concluded that

both the retrofitting of existing buildings and the construction of new ones could produce a

very good payback period as a result of energy savings (Building Design & Construction 2003).

The US General Services Administration (GSA) along with many national laboratories, private

companies, universities, and industries within America did a more recent study in 2013 to

examine the benefits of green buildings in the US. The study included a comprehensive post-

occupancy appraisal of 12 sustainable buildings (ranging from residential to commercial) to

examine their level of performance from an environmental perspective, the level of satisfaction

of the occupants, and their financial metrics (GSA 2013).

The 12 sustainable buildings were selected in different locations within the US to assess the

performance of green buildings in different climates. All the buildings, which were selected,

incorporated sustainability at the design stage and none of them were retrofitted to become


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green. The performances of these buildings were compared against similar conventional

buildings with the same environmental externality.

Figure 3: Performance Comparison between Green and Conventional Buildings

The key findings of that study showed how sustainable buildings outperform conventional ones

in the US, with different climatic conditions. Sustainable buildings consumed 26 % less energy

than the average consumption of non-sustainable buildings, and 13 % less operating costs than

conventional ones. They also produced 33 % less CO2 than normal buildings, and the overall

satisfaction of the occupants was 27 % higher than the average of similar conventional ones

(GSA 2013).

There are many other studies, which have been carried to examine the affect of green

buildings on employees’ performance. One of these studies was a study by Lawrence

Berkeley National Laboratory, which showed that companies in the USA could achieve a saving of up to 58 billion dollars by improving the quality of the air inside their buildings, which would in turn reduce the amount of sick leave by their employees. Furthermore the study also showed that companies in the US could also save up to $200 billion through the subsequent increase in performance of their workers (Building Design & Construction 2003).

The Heschong-Mahone group also carried out a study into the impact of day lighting on student performance. The study was done over three cities and the results showed up to a 20% higher performance rate for those students studying in environments with more daylight (Building Design & Construction 2003).

Herman-Miller performed a similar study into day lighting, and found that the productiveness of the employees rose by up to 7% after they moved to a greener building with subsequent more daylight (Building Design & Construction 2003).

2.5- The Performance of Green Buildings


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Although the studies above have examined and confirmed the commercial and the

environmental benefits of green buildings, a number of other studies have found that many

green buildings are underperforming their design green objectives.

One of the earlier studies which scrutinized the operational performance of several green

buildings in comparison with those built conventionally, in relation to the stated targets during

the design stage of those green buildings, was a study conducted by Turner and Frankel in

2008. This study examined if and how green buildings outperformed conventional ones and

whether green buildings meet their stated design targets when they are on operation.

The study analysed the actual measured energy performance in 121 green buildings to examine

what was intended, and what the eventual outcome of these LEED projects were. It also

compared these green buildings to the average energy consumption of conventional buildings

within the same region.

The study concluded that overall, green buildings are outperforming the conventional ones by

25-30% in terms of energy consumption. However, more than 50% of the green projects had

deviated in excess of 25% from their projection at the design phase. At the same time, 30% of

the green buildings did considerably better than their intended design target.

Another a study conducted in 2012 in Canada resulted in similar findings (Newsham et al.

2012). The study was undertaken by the National Research Council (NRC) in Canada along

with the Natural Resources Canada Program of Energy Research and Development (PERD),

the Public Works and Government Services in Canada, the Governments of Alberta, Manitoba,

Nova Scotia, New Brunswick, Ontario, and Saskatchewan; the McClung Lighting Research

Foundation Inc, the University of Idaho and the Integrated Design Lab.

The study examined 24 buildings across Canada and the US; of which half of them were green

and the other half were conventional. Data was collected on the physical building and on

energy usage. A questionnaire was also given to the building occupants, which elicited

feedback on their levels of satisfaction with their work environment and jobs, plus

organisational commitment. In addition, it also asked for feedback on how they commuted to

and from work, the state of their health and well-being, and their attitudes towards the

environment (Newsham et al. 2012).

This study also re-analysed previously gathered data by the New Buildings Institute (NBI) in

the US over the period of a year. It comprised of information from 100 North American

commercial buildings that were LEED certified. Each of these sustainable buildings was

matched up with a commercial, conventional building within the US that was comparable in

many ways.

The study concluded that all green buildings had outperformed the conventional ones in

relation to their internal environments. These included higher levels of satisfaction of the

indoor environment, the thermal conditions, the air conditioning, ventilation and heating

systems (HVAC) noise; and the quality of night-time sleep. The green buildings have also

outperformed the conventional buildings in terms of energy and water consumption (Newsham

et al. 2012).

However it is worth mentioning that many of these green buildings did not meet their expected

design energy targets. Interestingly, it was also found that there was a minimal correlation


18

between the amounts of LEED energy credits obtained during the design stage with the actual

post occupancy energy performance.

This discrepancy between the design and the actual performance of the green buildings created

a great deal of debate among the industry practitioners and the academic researchers. The main

reason that led to this discrepancy was primarily due the occupants’ operational behaviours,

which could be difficult to predict. Additionally, or alternatively, the design team simply may

have optimistically overestimated the amount of energy savings, which in reality was

unfeasible (Newsham et al. 2012).

Another reason that was found to cause this discrepancy was the fact that those responsible for

using the green technologies experienced some problems during operation. Also, in some

cases, those who were responsible for operating the building did not employ the building

systems as were intended (Newsham et al. 2012).

2.6- The Cost Premium of Green Buildings

There is a general agreement that green buildings are more environmental friendly than the

conventional ones. Green buildings also outperform conventional buildings on many aspects

such as operational cost saving, indoor air quality, lower energy and water consumption and

better productivity.

However, a big debate has been going on for more than a decade between both private and

public organizations regarding the cost premium green buildings require. There is a general

perception that green buildings cost more than conventional ones. Nalewaik and Alexia

published an article in 2008 named "Cost Benefits of Building Green" from a study they had

conducted. The article described why the perception concerning the higher costs of building

green used to be true:

1- Most of the technologies that were being used in earlier green buildings were new and not

widely available. This limited the opportunity of any price reduction through increased supply

and competition.

2- Architects who were specialized in sustainable design were also limited and so were able to

charge premium rates for their services.

3- Most of contractors, especially in the early days of sustainable structures, weren't familiar

with green buildings, their design or construction. Consequently, they used to add a premium

to their construction cost as they perceived the construction and management process would

need to be altered and the documentation level would need to be much greater and at a higher

standard. This would result in an increase in administration, time, personnel, overheads and

subsequent reduction in productivity. Furthermore, most of contractors (who were procured in

a design and build form) added even more premium for the certification and the

commissioning, as they weren't familiar on what had to be done.

However some of the methodologies, sample sources and findings of the current studies about

the cost of green buildings are debatable. Also, the claims that people make about green

buildings will depend on the source of information they have accessed and the studies that

were used in that information. Some of those studies are also more inclusive than others

regarding the costs, especially the soft costs, which will yield different outcomes. For example,

various consultants and agencies such as USGBC have published many studies on green

buildings over the past, but they now claim that building sustainably does not need to cost any


19

additional premium over the amounts set for conventional buildings. However, all of those

claims exclude the design and the documentation costs and mostly relies on comparing the

square foot of hard costs only (Nalewaik & Alexia 2008).

On the other hand, other public and private sources have shown that a premium of 2 to 8

percent is needed for green buildings compared to conventional ones. Ultimately, in order to

support or reject any of these studies, there is a very real need to conduct a proper, controlled

study approach to determine the true additional cost green buildings will incur over and above

conventional ones, if any. Currently, there are no data available from such a controlled study to

determine what additional costs will be needed at the design stage to go green, or on green

buildings at the design stage to see if there are any cost savings to be made if the design was

conventional (Tatari, O and Kucukvar, M 2010).

So, until there is a data bank of academically reliable and credible studies, and their findings,

the cost issue of green buildings will continue to be debated, especially when comparisons and

results can be manipulated to support the views of the parties concerned, and in particular,

while the data on green and conventional building costs and benefits are so varied. This

concern will also continue to act as a major barrier to go green in many countries (Tatari, O

and Kucukvar, M 2010).

However, in saying this, it is important to note that there appears to be a common agreement

that the cost of green materials and technologies are now lower than they have previously been,

and that there is a greater range available in the marketplace. In addition to that, most architects

and contractors are reducing their premium as a result of becoming more familiar with the

construction of green buildings. As with conventional buildings, green building costs will vary

on the size, location and complexity of the projects, and the level of certification needed

(Nalewaik, A and Venters, V 2008).

2.6.1- Background of Green Buildings Cost Premium

In the late 1990s the cost of green buildings was raised again as a result of introducing for the

first time the implementation of the Leadership in Energy and Environmental Design (LEED)

1.0 as a pilot project and the approval of LEED 2.0 in 2000 that made it a mandatory

requirement for all new projects. This raised many concerns in the real estate market on the

additional costs that could result from this process (Building Design & Construction 2003).

The concerns around the possible increase in building prices considered such additional

expenditure as: the fees for LEED accredited professionals, LEED certification costs, added

costs for LEED improvement, payback rates and indirect cost for additional design fees.

All of these concerns caused the General Service Administration (GSA) in 1998 to conduct a

study to determine whether they were valid, and if so, to what extent the cost impact would be.

The investigation was assigned to HDR/Hanscomb, which then examined the LEED 1.0

against any cost premium (Building Design & Construction 2003).

HDR/Hanscomb (1998) found that 2.5 to 7.0 % additional cost premium would be needed to

achieve various levels of green performance. The study also concluded that:

1- LEED 1.0 certification would add little or no increase in project costs if GSA’s design

guideline were followed.


20

2- LEED 1.0 Gold rating for the Denver Federal Courthouse would add 7% to the project costs

compared to the current scheme.

3- LEED 1.0 Silver rating for Oklahoma City Federal Building would add 2% to the project

costs compared to the current scheme.

4- LEED 1.0 Silver rating for other Federal projects would add 2.5% to the project costs

compared to the current scheme.

As a result of the updates of the LEED 1.0 and the introduction of LEED 2.0, GSA recognized

that another study was needed. This time they contracted the Steven Winter Associates (SWA)

to investigate the cost premium of the 69 LEED points, and to then use their findings to

determine the additional cost that would be needed to build the new Federal Courthouse, and to

retrofit a 1960s Federal Office building in accordance with the three levels of LEED

(Certificate, Silver and Gold). (Building Design & Construction 2003).

The key findings of the SWA study (2000) showed that there are some LEED points that can

be achieved simply with little or no cost at all (low intensity); whereas others, are more

complex and need premium cost to be met (high intensity). For example, to get a point for

reducing water consumption by 20%, which can be easily achieved by using low-flow faucets,

is relatively inexpensive. Whereas, getting a point for reducing portable water usage for

irrigation by 50% can be much more expensive, and more difficult, especially when TSE

sources are not available. Using an onsite renewable energy is another example of a high

intensity point that is usually an unfeasible thing to attempt (Building Design & Construction

2003).

Overall, the SWA’s study (2000) indicated that a LEED Certificate could be easily achieved

through using the low intensity LEED points, which shouldn’t cost any premium at all.

Conversely, in the case of LEED Silver or Gold, an additional cost could be expected but this

could also be mitigated or avoided through well-integrated design strategies.

Parallel to the SWA study, the US Green Building Council (USGBC) in 2000 was also

mandated by the US Senate Environment and Public Works Committee to investigate the

concerns of the potential additional cost, which might result from enforcing the adoption of the

LEED system. (Building Design & Construction 2003).

USGBC (2008) gathered all key stockholders from public officials, real estate practitioners,

academicians, and USGBC members to participate in the preparation of making the business

case for high performance buildings. This report concluded the following facts:

1- Many green buildings don't cost any additional cost compared to conventional ones, and

in some cases, they cost less due to the downsizing of the more costly mechanical, electrical,

and structural systems as a result of the projected reduction in power and water consumption.

The key success factor is the successful design integration.

2- A saving of 50% in energy consumption can be achieved through a successful design

integration, site orientation, energy saving technologies, light reflective materials, natural

daylight and ventilation, and downsized HVAC and other equipment.

2.6.2- Cost Determining Techniques


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There are many strategies to achieve certification points at minimum cost. Some points will

cost nothing to be achieved while others will be more expensive. Therefore, the designers will

need to carefully consider each point in terms of cost burden. Another strategy would be to

invest in multitask technologies which would obtain several points instead of a single one.

In order to determine valid views of the actual cost premium of green buildings, ‘Artificial

Intelligence’ techniques are needed to help decision makers to select the best green initiatives.

There are a few decision models used to determine the cost premium of green buildings. One

of these models was developed by Castrolacouture et al. (2009) which suggested the use of a

mixed integer optimization model which maximizes LEED credits when considering design

and budget constraints.

Another model was developed by Wang et al. (2005) called an ‘Object-oriented Framework.’ It

aimed to address specific problem areas related to green building design optimization. This

framework uses multi objective, genetic, algorithms to explore the trade off between life cycle

cost and life cycle environmental impacts in green building design. Wang et al. (2005) also

developed another model to optimize the building shapes using the genetic algorithms by using

life cycle cost and life environmental impact as two objective functions for green performance

evaluation.

Another useful study was conducted by Tatari, Omar, Kucukvar, and Murat (2010) who

introduced a new model called ‘Artificial Neural Network’ (ANN) in their published study

called, "Cost premium prediction of certified green buildings: A neural network approach," in

2010. It was the first time that green buildings had been examined by ANN to determine the

cost premium. The Artificial Neural Network model was used because of its parallel

processing and fast response; its tolerance for fault; and its better classification and prediction

capability than traditional statistical methods. The Artificial Neural Network model had been

used previously, along with other models, on conventional buildings. For example, Gunaydin

and Dogan (2004) developed a neural network model for 30 residential building projects to

estimate cost per square meters. Kim et al. (2004) used three different prediction models;

neural network, regression analysis, and case-based reasoning, to predict the cost of 530

buildings in Korea. In another study, Kim et al. (2004) provided hybrid models of neural

networks and genetic algorithms for preliminary costs estimation of 498 residential buildings.

Emsley et al. (2002) developed an ANN model to predict building cost by utilizing project

strategic variables, site related variables, and design related variables. Attalla and Hegazy

(2003) used ANN modeling and statistical analysis for determining the cost deviation of a

reconstruction project. Apart from ANN, some studies have utilized multiple regression

analysis for cost prediction. For instance, Stoy et al. (2008) used regression analysis for

determining the cost drivers of the 70 residential building properties.

2.7- Cost Comparison of Green Buildings

There have been many studies carried out in relation to the various cost differences between


22

green buildings and conventional ones. Other studies have looked specifically at how the

different levels of certification affect the cost of green buildings.

2.7.1- Cost Premium Compared to Conventional Buildings

One of the early reliable studies on comparing the cost premium of green buildings with

conventional ones was a study conducted by Anne Sprunt Crawley and Beverly Dyer on behalf

of the US Department of Energy. What was unique about this study was the fact that they

managed to examine the cost of a hypothetical, two storied building of 20,000 sq ft without any

sustainability requirement (conventional), which was estimated to be $2.4 million. They were

then were able to modified these calculations by including sustainability requirements using

certain modeling software plus vendor quotes. The additional cost premium was found to be

$47,210 over the base case construction costs, which is less than 2% cost premium.

There was a similar finding by another study done by Kats, et al. in 2003. This study had

gathered a considerable amount of data and had analysed this in relation to the expenditure

used to build green buildings and the subsequent, financially quantifiable, benefits. Information

was gathered from several dozen architectural designers and representatives of the green

building industry within the state of California. They provided the analysis team with their

costs on 33 green buildings in the area. Interestingly, these green building’s average premium

was below 2%, which is significantly lower than is generally believed.

What was apparent from the data gathered, was that the higher costs involved in green

buildings came from the additional time spent by architects and engineers to ensure best

practices concerning sustainability that were incorporated during the design phase.

Another interesting study was conducted by the Davis Langdon Company in 2007. Two

hundred and twenty one buildings (83 LEED and 138 non LEED) were analysed and

regularized to take into account variations in dates and locations so that the comparison could

be more consistent. However, only three types of buildings were examined:

1. Academic buildings

2. Laboratory buildings

3. Library buildings

In their study, they used three criteria to examine green building costs: the incorporation of

individual, sustainable components; the comparison of the costs of similar buildings built

conventionally; and the actual green building costs as opposed to their original budgets.

Furthermore, it is worth mentioning that all of the LEED buildings were Certified, Silver, or

Gold LEED; no LEED Platinum certified buildings were included.

2.7.1a Cost Analysis of Academic Buildings

Sixty academic buildings were analysed. Of these, 17 sought and received LEED certification

and 43 did not. Only academic buildings on university and college campuses in the US were

considered. The architecture of these buildings was varied, but the researchers focused on

classrooms, computer labs, and faculty office buildings. Those that achieved a higher LEED

level did so in the areas of internal environments, efficiencies in energy and site features.


23

Figure 4: Cost Analysis of Academic Buildings

What was especially significant about this study was that both the LEED seeking and non-

LEED seeking academic buildings were spread across the population with no real variation

between the two in cost. Also, the buildings with a LEED Silver rating were predominantly in

the higher cost bracket, and the Gold towards the lower end when compared with each other

and across the overall population. Unfortunately the Gold sample was too small to exact solid

conclusions, but what was apparent was that the costs of the Gold buildings were able to be

kept down through employing simple sustainable methods as opposed to using additional green

technologies (Davis Langdon 2007).

2.7.1b Cost Analysis of Laboratory Buildings

Seventy laboratories also underwent an analysis; of these, 26 sought and received LEED

certification and 44 did not. These included laboratories across a range of disciplines in the

science field, involved in teaching, research and production. The laboratories were located in

wet and dry science buildings. Those that had received LEED certification achieved a high

score in Energy efficiency, which was largely due to the design of buildings with laboratories.

These buildings usually have strong and efficient mechanical systems.

As with the academic buildings, there was no noteworthy difference between those laboratories

that had sought LEED certification, and those that had not, in terms of the average costs per

square foot. What was significant was that the LEED seeking laboratories were spread across

the study population, even though there was a reasonably wide, standard deviation in price

amongst all the laboratories. With this group of buildings, the Silver ones were distributed

across 75% of the range but, again, no conclusive analysis could be postured on the Gold

laboratories due to the limited sample size (Davis Langdon 2007).


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Figure 5: Cost Analysis of Laboratory Buildings

2.7.1c Cost Analysis of Library Buildings

Fifty-seven libraries were also analysed as part of this study. These included different types of

library buildings, not just those found on higher education campuses. Additionally, branch and

community libraries were included as well as the main public ones. Those libraries that were

LEED certified scored higher with regards to the indoor environmental quality. However, on

pricing, they were spread across the population in a similar fashion to the non-certified library

buildings. Several of the LEED projects were even found in the lowest cost bracket, which

means that LEED certified libraries are no more expensive than non-LEED ones. This may

contribute to the higher green versus non-green ratio, than can be found in the other two

building groups. However, another contributing factor is that there has been a growing trend

towards this type of building, going green, especially new library projects (Davis Langdon

2007).


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Figure 6: Cost Analysis of Library Buildings

As can be seen from this study, green buildings are like conventional ones in that the cost is

predominantly determined by the design of the project itself, and the clients’ requirements.

Overall, from the cost comparisons between the building projects that sought LEED

certification and those that didn’t, the study was able to draw four main conclusions:

1. The cost range of these buildings is widespread, even amongst the same building type.

2. The differences in the building costs are largely due to the program type.

3. Green buildings can be found anywhere from low to high cost construction projects.

4. Non-green buildings can be found anywhere from low to high cost construction projects.

In drawing these conclusions, it is important to remember that there is an equally wide range of

cost variation amongst building projects in the marketplace, without even including the issue of

green versus non-green designs. This, no doubt, was a contributing factor in the lack of

important statistical differences between the buildings seeking LEED certificates, and those

that didn’t. In addition to this, comparisons across buildings, or sets of buildings, based on

average cost per square foot, are generally not so accurate, as the range can be so wide that it

skews the true average figure (Davis Langdon 2007).

2.7.2- Cost Premium of Different Green Certification Levels

The early study done by the Steven Winter Associates (SWA) (2000) was mainly intended to

determine the cost premium of green buildings compared to conventional ones. However, an

interesting outcome was also highlighted according to the study. It was found that the LEED

Certificate could be achieved at no additional cost compared to the other levels of LEED

(Silver, Gold and Platinum), which could increase the project cost by 2% to 7% depending on

the design (Building Design & Construction 2003).

There was another study carried out by USBG (2002) that intended to compare the cost


26

premium of different LEED certification levels. The study found some interesting results when

comparing the 26 LEED 1.0 and LEED 2.0 projects. The cost of each building per square foot

varied from $13 to $425.

Figure 7: Cost of LEED Certified Buildings

The USBG study found that there was no significant correlation between cost and LEED

ratings. Two LEED Platinum buildings cost $215 and $260 per square foot where some lesser

LEED rating buildings cost up to $340 per square foot (see the Gold LEED bar chart). Two

LEED silver buildings cost $245 and $255 per square foot respectively, while two LEED

certified buildings cost $235 and $425 per square foot respectively. This can be simply

explained, by identifying that different building types can cost more per square foot to

construct than others (Building Design & Construction 2003).

Similar views were also shared by Gregory Kats in 2003, (a founding principle of Capital E,

Washington D.C.) for the California task force who analyzed 33 certified or pre-certified

buildings, nationally. These included 25 office, and 8 school, buildings that had been, or were

due to be completed from 1995 to 2004. The selection of these projects was determined by the

availability of reliable data concerning the actual costs of each building’s design, in green

terms, and conventionally.

Although a large number of these buildings hadn’t undergone the certification process through

USGBC, they had been given an estimated LEED level based on a detailed and thorough

assessment by the client or design team. These estimations are considered to be close to what is

predicted to be their final level LEED certificate (Kats, et al. 2003).

Even though the number of buildings studied was small in comparison to research studies, the

analysis of the data provided a deeper understanding of the cost range involved in green

buildings. In the figure below, the average cost premium is around 2%. The Bronze rated

buildings had a lower cost premium at 1%, as did the Gold level buildings at 1.8%. Silver rated

buildings were slightly higher than the average at 2.1%, whereas the cost premium rose

dramatically to 6.5% for the Platinum level buildings (Kats, et al. 2003).


27

Figure 8: Average Green Premium vs. Level of Green Certification (Offices and Schools)

Although there is a growing body of evidence that the cost of green buildings lessens with

time, the data did not give a clear indication of this. In saying that, the green premium was the

lowest for the buildings that had only just been completed, but at the same time, the green

premium projections for projects due to be completed in the following two years (2003–2004)

were higher (Kats, et al. 2003).

The reason for this was evident in the data, in that the cost projections for the 2003-2004

constructions were set at the conservative end of the green premium scale. Once these

buildings were completed, then it was anticipated that these figures would drop to a more

realistic level. Another important consideration concerning these projected costs was the fact

that the data collected came from designers with varying degrees of experience in designing

green buildings. For some, it would have been their first attempt and so their green premium

projections would have reflected this, while others, who were more experienced, would have

set more accurate premiums (Kats, et al. 2003).

Another interesting anomaly reflected in the data was the different cost levels given for the

LEED Gold buildings as opposed to the cost levels of the Silver ones. It would be totally

feasible to expect the reverse, as the higher rating would have greater requirements to meet.

This result can be attributed to the limited number of buildings in the data set. The green

premium shown for the Gold level is the average of only six buildings. Consequently, as more

data for this category is added, this could rise, given the higher standards to meet. However,

the data did reveal that Gold level buildings can be built at reasonable cost premiums and

therefore can be a realistic target for green buildings.

The conclusion of this study showed that overall, the costs involved in the construction of

green buildings are currently higher than when building conventional ones. However, that cost

is smaller than what most investors assume (Kats, et al. 2003). The cost of green buildings is

decreasing with time, as the knowledge of developing these constructions is increasing

amongst developers, consultants and contractors.

Another study done by KEMA Xenergy (2002) reviewed 50 green buildings and found that the

premium for green buildings had fallen sharply regardless of the earlier estimates which


28

showed a premium of 2 to 5 % for LEED certified buildings, and 10 % for Silver, Gold and

Platinum. For example, the data from Block 225 of the Capitol Area East End Project in

Sacramento achieved LEED gold rating without any additional cost over its original base

budget. Other data from Seattle had shown a premium of only 1.7% for all the municipal

projects (Building Design & Construction 2003).

2.8- Soft Costs of Green Buildings

The design of green buildings is generally more expensive than the design of conventional

buildings. This is due to the fact that green building designs are usually more complex than

conventional ones. In the design of a green building, a holistic and integrated design process is

being used right at the start of the project, as green buildings have many unique design features

not typically found in conventional buildings and require deeper integration (Kibert, 2008).

In another study by Yudelson in the same year (2008), he divided green building designs into

three categories, namely: indoor lighting, building materials, and layout. Yudelson elaborated

that in a green building, the lighting design integrates low-energy lighting fixtures with natural

lighting through strategic window installation and usage of energy- efficient fluorescent

lighting.

Environmentally friendly building materials, such as recyclable bamboo flooring, as well as

toxic-free materials, such as formaldehyde-free cabinets and non-toxic paint, are used in green

buildings to ensure that they are sustainable. Building layout plays a significant role in

ameliorating energy efficiency of the building. Green buildings also take advantage of natural

ventilation through the building’s orientation (Bon-Gang Hwang and Jac See Tan, 2010).

Another factor, which increases the soft cost of green buildings, is the fact that most of the

certification bodies, such as LEED, require a commissioning of the building as a prerequisite

for certification. This increases the soft costs of the project as a third party engineer will be

required to inspect the building systems to ensure that they preform as per the design

specifications. These systems include mechanical, electrical, plumbing, controls, fire

management, audiovisual installations and elevators.

The process also includes proper documentation, testing and inspection at startup, correction of

deficiencies, performance verification, reporting, operator training, and supply of operation and

maintenance manuals. All of these will lead to an increase in the green project soft cost as well

(Nalewaik, A and Venters, V 2008).

These are just some of the reasons that the design of green buildings usually cost more than the

design of conventional ones.


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2.9- Factors that could Influence the Cost of Green Buildings

The study done by KEMA Xenergy (2002) where the 50 green buildings were reviewed, also

found that subsequent government green projects had dropped greatly mainly due to the start

up costs, training and research. The study concluded five management reasons that could lead

to increased green project costs:

1- Lack of a clear green design goal, which is a crucial part in controlling any green project

cost, and should be defined before releasing the initial design RFP.

2- Lack of projected planning. Green designs may be incorporated at the mid project stage

rather than at the start which could result in the need to redo the design work and therefore

increase the design cost.

3- Lack of a single point of responsibility during the LEED process.

4- Lack of knowledge of LEED.

5- Lack of time to research green materials and technology options. This is a very important

consideration to keep in mind as green products and technologies are coming onto the markets

on a weekly basis.

In another study carried out by Bon-Gang Hwang and Jac See Tan in 2012, under the name

“Green Building Project Management: Obstacles and Solutions for Sustainable Development,"

the authors conducted a survey of 101 managers and professionals listed under the BCA’s

Certified Green GMM and GMP Scheme in Singapore to examine the factors which could

affect the cost of green buildings and their responses were as follows:

Table 1: Obstacles encountered during green building project management

According to the survey results, and as can be seen underlined in the above Table, the top Six

obstacles encountered by professionals and managers when managing a green building project

are:

(1) The high premium cost associated with green building construction; for example,

compressed wheat board, which is a green substitute for plywood, costs about 10 times more

than ordinary plywood.

(2) The lack of communication and interest between project members.


30

(3) The lack of expressed interest from clients or market demand.

(4) The lack of credible research on the benefits of green buildings.

(5) The lack of Green Product Information: the lack of such information makes developers use

consultants who are specialized in green products and building systems, but usually at a

premium fee which therefore increases the project cost.

(6) The high cost and complexity of Green Building compliance. Green building practices are

costly to implement and Green Building codes and regulations are becoming more

complicated, thus causing difficulties for developers when evaluating the cost involved in the

compliance of such codes.

Surprisingly, none of the respondents in the survey felt that there was a lack of expertise and

knowledge in green buildings and their principles. This could indicate that there are many good

consultancy and services provided in Singapore to assist in green building construction.

Furthermore, none of them felt that there was a lack of governmental support for sustainable

construction, which could be due to the tremendous effort that the government has put into

actively promoting green building and sustainable development (Bon-Gang Hwang and Jac See

Tan 2012).

Another far eastern study conducted by Tam, Hao and Zeng (2011) was published under the

title of, "What affects implementation of green buildings? Empirical Study in Hong Kong."

The authors identified the following factors which increase the cost of green buildings in Hong

Kong:

1- The use of energy efficient systems is one of major cost elements in green projects in Hong

Kong.

2- The lack of green materials locally is another major cost driver as some of these materials

are imported and therefore the transportation cost escalates the price.

3- The increase in the preparation and processing involved in the production of local green

materials generally make them more expensive than conventional materials. .

4- The higher level requirements of green designs also raises the cost of green projects as they

require more analysis and in depth understanding of site parameters such as orientation,

weather patterns, and temperature; all of which can improve the performance of green

buildings.

The study by Tam, Hao and Zeng (2011) also addressed the cause of the cost premium of green

buildings from a management perspective:

1- The incomplete integration among project team members, which could be caused by the

lack of a clear green design goal and the absence of a single point of responsibility.

2- The lack of knowledge and experience in developing green buildings.

3- Insufficient time and funding for searching for new green products and technologies.

Another study by Tatari, Omar, Kucukvar, and Murat (2010) who introduced the new model

called Artificial Neural Network (ANN), also examined possible factors that can influence the

cost of green buildings. They selected 74 LEED-NC, version 2.2, certified buildings to study

using the ANN model in order to analyze the cost premium of different LEED categories.

These categories included Sustainable Sites (SS), Water Efficiency (WE), Energy and

Atmosphere (EA), Material and Resources (MR), Indoor Environmental Quality (IEQ),

Innovation and Design Processes (ID) and Building Grade (BG). The cost premium

assumptions were based on the study that was conducted by Kats (see the below table):


31

Table 2: The data description of the 74 LEED-NC certified buildings in USA

These categories were used as inputs in the modeling process (as shown in the table above) and

the premium cost was entered as an output variable for the ANN model.

Figure 9: Architecture for the best performing ANN model

The findings of this study showed that Sustainable Sites, Energy and Atmosphere, and

Building Grade were the main cost premium causes (Tatari, Omar, Kucukvar, & Murat 2010).

In summarizing, it is clear from this literature review that there are similarities and differences

between the various studies that have been conducted around the issue of green building costs

and cost premiums, along with comparisons with conventional building costs. Overall, the

results suggest that there are some cost factors that are more localized to a certain part or parts

of the world, whereas they may not be as relevant elsewhere. For example, the knowledge,

access, and use of green materials and green technologies seem to present a greater challenge

in the Far East in comparison with the US market, which doesn’t seem to suffer from this issue.

At the same time, the studies identified some common factors that have an influence on green

building costs. These factors, which can be considered as more general challenges across the

global green building industry, are related primarily to the management process of green

buildings. For example, the lack of integration in the design stage seems to be a common

challenge among many green building developers, globally.


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3- Conceptual Framework

3.1- Introduction

According to Miles and Huberman (1994), they defined a conceptual framework as a visual or

written product, one that “explains, either graphically or in narrative form, the main things to

be studied, the key factors, concepts, or variables and the presumed relationships among them”.

Therefore, the conceptual framework would reflect the system of concepts, assumptions,

expectations, beliefs, and theories that support your research.

The conceptual framework aims to address what is the thesis planning to study and why. It also

would help to assess and refine the research goals, develop realistic and relevant research

questions, select appropriate methods, and identify potential validity threats to your

conclusions.

3.2- Study Motivation

The intention of this conceptual framework is to define the specific variables which are

according to the literature review if not managed properly could lead to add a cost premium to

any green building with a gravity which depends on the complexity of the project and the level

of green objectives it aims to achieve.

These specific variables should not to be confused with the generic factors, which could cause

any project (green or conventional) to go over budget. For example, Architectural features,

Specification and timeframe. These specific factors are more related to green projects and they

shall be looked at as additional factors on top of the generic ones.

From the literature reviews, six main factors could lead to a cost premium if they weren’t

managed probably. These factors are:

1- Early Definition of Green objectives

2- Early Design Integration

3- Procurement Method

4- Green Products Availability and Cost

5- Experience Contractor

6- Experienced Designer

Figure 10: Conceptual Framework Model

This conceptual framework will be used to test the cost premium of green buildings in the

UAE and whether there are any additional variables not mentioned in the literature reviews,

which could alter the above conceptual framework to suit the UAE market.


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4- Sustainability in the UAE

The UAE climate is warm, dry, and sunny during the winter months. The summer climate is

also sunny, but hot and humid. The average daytime temperature in the winter is 26°C, and

nighttime temperatures are generally in the range of 12-15°C along the coast, but this drops to

less than 5°C in the mountains and inner desert regions. Temperatures often reach the mid-40s

in the summer, although these can even go higher, further inland. Coastal areas generally

experience an average humidity rate of between 50%-60%, but during the summer and autumn

months, this can exceed 90% (Szabo 2011). The humidity levels inland are generally lower.

Humid southeasterly winds blow along the coast in summer and local northwesterly (Shamal)

winds, commonly occur in the winter.

Sparse and intermittent rainfall occurs during the winter months, often in the form of short,

sharp bursts, which usually run off rapidly down the Hajar Mountains into dry riverbeds

(wadis) or stony plains. Localized thunderstorms, do sporadically occur in the months of

summer, but tend to be centred around the mountains in the south and east of the country.

Sufficient rain can fall to cause flash flooding. However, the average annual rainfall is usually

around 120mm in the coastal regions but this can vary drastically from year to year, from as

little as 30 mm, to 350 mm, depending on the location (Szabo 2011).

Oil has produced dramatic changes in the UAE since it began to be commercially exploited in

1962. Not only did the wealth of the country increase to where its GDP has now placed it up

with the world’s wealthiest nations, but so did the need for foreign workers. As a result, the

population has risen by 40 fold since the 1968 census (Szabo 2011). Figure 11 (on the next

page) shows the exponential growth in population in relation to a similar pattern for the

country’s GDP, albeit at a lower rate of incline.

Energy demand fluctuates dramatically throughout the year, and as a result, the UAE has one

of the most varied, demand curves in the world, on an annual basis. This presents a common

challenge for all the UAE utility authorities. As the heat in the summer months climbs, so does

the energy demands which can be in excess of 92% of the country’s installed generation

capacity. In contrast, this can drop to around a third of the energy that the UAE can generate, in

the cooler evenings, during winter. Generally, the levels of operation of the power plants

during the winter months, are dictated to by requirements regarding the ongoing production of

potable water (UAE embassy WDC 2013)

Water demand in the UAE continues to grow, irrespective of the limited resources in the

country, and the region. This is a serious issue, especially given the estimation that water

availability, per capita, within the MENA region will shrink by 50% by the year 2050. The

resulting consequences will be critical, given the current over-demands on the region’s aquifers

and natural hydrological systems (World Bank 2007). In one of their presentations (2009), the

Environment Agency in Abu Dhabi (EAD), reported that groundwater (72%), and desalination

(21%), were the main sources of water used in the UAE, with retreated water making up the

last 7%. Surface water resources in the country are virtually nonexistent (Szabo 2011).


34

Figure 11: Calculation based on World Bank Indicators

All of these concerns have put pressure on the UAE government to address these challenges

with strong and far-reaching sustainable measures. This action will profit the UAE, not just

environmentally, but also commercially, in the form of billions of dirhams worth of savings

made in not having to continuously expand its desalination plants and power substations. In

acknowledging all of these problems, there is still a substantial amount of work to be done at a

federal level, as the UAE is still one of the top countries which subsidize power and water

heavily. These subsidies discourage people and private companies to behave sustainably,

towards the end of becoming eco-friendly, and will have a drastic impact on the country

especially with the exponential increase in population.

However, on a state level, there has been more firm initiatives to address the growing power

and water demand issues. Abu Dhabi is one of these emirates, which has set KPIs for

transforming the state to be one of the most sustainable cities in the world. One of these

initiatives was the establishment of the Abu Dhabi Urban Planning Council (UPC), which was

set up as a result of a decree by the Amiri (Decree 23: 2007). The UPC was given the

responsibility for all future urban environments within Abu Dhabi, and was tasked with job of

being both the expert and authority on the visionary ‘Abu Dhabi 2030 Urban Structure

Framework Plan.’ This plan ensures that various factors are considered in urban developments

such as sustainability, infrastructure capacity, community planning and quality of life. The

UPC also ensures that in any urban planning, both in existing and new areas, best practice is

employed (UPC 2013).

The purpose of establishing the UPC was to evolve the building codes to become more

sustainable and adaptive for conserving resources. In other words, it has become an authority,

which ensures that the adoption of sustainable KPIs are part of the design, construction, and

operations of any project within the emirate. The UPC grants planning permission for any new

developments by using a highly consistent development review process. This assists them in

making the best development decisions, and applying strict regulatory controls for developers


35

across all their projects. This will help the emirate to make the most of the current climate of

economic and cultural growth (UPC 2013). Therefore, the Abu Dhabi Urban Planning Council

is engaged in two primary activities:

1. Reviewing and approving new developments.

2. Creating infrastructure plans that set out the rules and guidelines to which developers

must adhere.

The UPC (2013) describes the aims of the reviewing process:

1. Provides developers with information and direction to improve overall integration with

the surrounding area.

2. Provides the UPC with all the required data so that well informed decisions can be made

regarding development applications.

3. Ensures a transparent, consistent system is used for all development reviews.

5- Methodology

In this thesis, two methods will be used to examine the issue of green building cost premiums

in the UAE:

Method 1: Cost Comparative Approach

Two recent green buildings will be compared with two similar conventional buildings in terms

of construction cost per square meter at a shell and core level. The comparison will include:

HVAC (but will exclude air conditioning as the green buildings are connected to a centralized

district cooling plant), completion of associated public spaces, and above or underground

parking spaces. This comparative study will exclude the design fee, land price and finishing

items.

Method 2: Case Study – Masdar Headquarters Building

Interviews with all key stakeholders of the Masdar Headquarters Building project (which was

used in the case study) will be conducted to discuss the methodology that was adopted in order

to complete this green project successfully. The use of the interview approach will also address

the different cost elements of green buildings and will identify the practices that have been

adopted to ensure the cost effectiveness of green buildings.

Prior to that, a full description of the Masdar Headquarters Building will also be discussed and

all the green objectives that have been achieved will be outlined.

5.1- Method One: Cost comparison

This section will compare the project cost of two green buildings and two conventional

buildings in the UAE. These buildings are:

1- Siemens Headquarters Building (Green)

2- Masdar Headquarters Building (Green)

3- Landmark Tower (Conventional)

4- Tamweel Building (conventional)


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Cost data were gathered from previous market studies conducted by Masdar’s internal team

(Secondary Data). The reason for selecting secondary data was that it saves valuable time,

which can then be used instead to gather more data. Even more importantly, it provides

researchers with access to more extensive and higher quality databases where they can find

data in greater depth and amount, especially quantitative data. This data exceeds what they

singlehandedly could collect themselves. Additionally, it enables the researcher to review

information from past studies and developments, which they could not gain by conducting a

new survey (Secondary Data 2010).

It is also worth mentioning that the contractors for both the green buildings were procured as a

‘Design and Build’ after the concept design was developed whereas the contractor for the other

two conventional buildings were procured traditionally (Design-Bid-Build).

5.1.1. Findings

Both Siemens HQ, and the Masdar HQ projects had set an estimated budget of AED 7,000 per

m² in order to be comparative with construction cost rates used for the conventional buildings.

These usually range between AED 4,500 to AED 9,500 per m² (as per the 2009/2010 rates),

depending on their grade.

In the following table, the projected versus the actual costs have been listed for both the green

buildings and the conventional ones.

Siemens

HQ Building

Masdar

HQ Building

Landmark

Tower

Tamweel

Building

Location Masdar City,

Abu Dhabi

Masdar City,

Abu Dhabi

Corniche,

Abu Dhabi

JLT,

Dubai

Gross Floor

Area (GFA) -

in m²

22,176 32,570 82,643 79,838

Actual Project

Cost (AED) 136,900,000 199,816,950 510,000,000 491,323,052

Budget Cost /

GFA

(AED/m²)

7,000 7,000 7,500 7,500

Hard Cost /

GFA

(AED/m²)

6,173 6,135 6,171 6,154

Rating

LEED

Platinum

Pearl 4

LEED

Platinum

Pearl 4

None None

Period 2009/2013 2012/2014 2008/2012 2008/2010

Table 3: Cost Comparison between two green buildings and two conventional ones


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Interestingly, all four buildings cost less than their budgeted cost. Although one of the green

buildings cost the most per m², it was only slightly higher than one of the conventional

buildings. On the other hand, the Masdar HQ building cost the least per m² amongst all the

buildings.

From this comparison, it is evident that green buildings are not necessarily more expensive

than conventional ones at the core and shell level. Any cost premium therefore can be

attributed to other factors such as the meeting of client requirements on the finishing level, or

the technology, which was installed and used, regardless of whether the building was green or

conventional.

5.1.2. Limitations

It is difficult to compare the “basic” vs. “green” cost, as the latter involves a different

architectural design, not necessarily or solely the addition of green elements, each of them with

a clear price tag that can be added to the basic design. Thus, research so far has calculated

excess cost based on the average cost of green buildings.

Building a typology from a selection of buildings can hardly be as detailed as actual building

specifications, which include hundreds of items. Moreover, every building has its own

characteristics which affect the appropriate green solutions employed, as well as their costs and

benefits.

Thus, research findings are inevitably limited to specific case studies, which make it difficult to

extrapolate general features that apply to other green buildings. Still, they provide some

indication in a market suffering from a lack of information concerning green constructions.

Another limitation in this case study is that the sample size is too small to allow for a

representative sample that could provide statistically valid estimates of the average price of a

green building compared with a conventional one.

5.2- Method Two: Case Study: Masdar Headquarters Building

This section will examine the sustainability criteria of the Masdar Headquarters Building and

define the design and construction methodology used to deliver the project within the defined

cost constraints.

5.2.1- Research Approach

The research questionnaire in this study was compiled using a combination of content analysis

on a range of literature and existing research reports, which examined the cost premium of

green buildings. These studies included the work of Snook et al., 1995; Sjostrom and Bakens,

1999; Poon et al., 2004; Tam et al., 2004 and the study of the article called ‘Do green buildings

cost more’ published by the Building Design and Construction Journal; Nov 2003;

ABI/Inform Global, (p. 9).

This interview questionnaire was also modified to capture other possible obstacles encountered

from a management perspective, which would then provide a more comprehensive and deeper

insight into the management culture adopted in delivering the Masdar Headquarters Building

project. From this information, possible challenges and solutions can be identified from the


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experience gained working on the Masdar Headquarters Building during the course of the

project.

Additionally, the survey results can be used to elicit expert opinions and feedback on its

content from within the industry and field of study. Through this supplementary knowledge,

along with the valuable opinions from managers and professionals involved in the Masdar HQ

building project, quality findings can emerge and ongoing beneficial discussions can be held.

The interviewing questionnaire is as follows:

Planning questionnaire:

Q1- Are all projects fit to be green? If not, what would be the limitation for these projects,

which could increase their overall cost?

Q2- How did the relationship between the master plan and the Masdar Headquarters influenced

the cost?

Management questionnaire:

Q3- How did the clarity of the owner’s requirements affected the Masdar Headquarters cost?

Q4- How did the early defining of the green objectives affected the Masdar Headquarters

cost?

Q5- How did selecting the right project team members affected the Masdar Headquarters

cost?

Q6- How did the procurement method used affected the Masdar Headquarters cost?

Design questionnaire:

Q7- Did the design of Masdar Headquarters cost more than conventional ones? If so, why?

Q8- Did the use of a multi-rating system (LEED and Estidama) affect the Masdar Headquarters

cost? If so, how?

Q9- How did the ongoing research of green materials and technologies affect the Masdar

Headquarters cost?

Construction questionnaire:

Q10- Did the construction of Masdar Headquarters cost more than the construction of

conventional ones? If so, why?

Q11- How did the maturity of the green product market affect the Masdar Headquarters cost?

Q12- Did the project management practices used in Masdar Headquarters differ from those

used for conventional ones? If so, how did they affect the project cost?


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5.2.2- Masdar Headquarters

5.2.2.1- General Overview

The new Masdar headquarters complex consists of three buildings within a 32,570m² of GFA.

These buildings house the corporate offices of Masdar, the secretariat of the International

Renewable Energy Agency (IRENA), along with additional office space for other commercial

and retail companies.

The building has achieved Estidama Pearl Building Rating level 4 along with LEED Platinum.

5.2.2.2- Project Goals and Objectives

Economic

- Achieve Masdar commercial targets for the project development (cost per GFA of AED

7000m²)

Energy Efficiency and Greenhouse Gases:

- 50% reduction in energy demand from ASHRAE 90.1-2007

- 50% reduction in operational carbon

- 20% provision of renewable energy

Water Efficiency

- Achieve a 30%, reduction in water consumption compared to the defined benchmark

amount of 180L PP/PA

Waste Reduction

- 50% diversion of operational waste from landfill, with a 90% construction waste

diversion.

Certification Level

- Review paths of the least cost effective path to achieve both Estidama 4 Pearl and

LEED Platinum.

Social

- Aspire to achieve a high level of occupant satisfaction. This includes, but is not

exclusive to: air quality; internal, natural and artificial lighting environment; noise; external

light pollution; visual amenity within the building, and to the outside; and the degree of control

over the internal environment.

Materials Specification

- Optimum selection of local materials and local supply chains to achieve a 30%

reduction in embodied carbon.

5.2.2.3- Management Strategies

The greatest challenge the project team faced was to try and find the right balance when

attempting to meet the expectations of the various stakeholders, that at times were contrary to

one another. For example, While the Masdar Headquarters’ sponsors who financed the project


40

were aiming to get a minimum of 12% Internal Rate of Return (IRR) for any financing they

make on any project regardless whether it was conventional or green; In other hand, the

Masadr City management had a mandate from the Abu Dhabi government to deliver the

project at the highest sustainable standards as the project will host the International Renewable

Energy Agency (IRENA). This difference in interests made delivering the project very

challenging.

Therefore, it was important to raise the bar and to establish a clear vision to all the project

team, from the beginning of the project, and to carry this story through every stage and

individual decision of the design development, to the delivery.

It was also essential that the initial vision, objectives and priorities were established based on a

deep consideration of the client values, along with the project and location context. This initial

direction needed to be balanced and communicated clearly and the process employed needed to

encourage integrated holistic design.

For that reason, it was very important to develop a decision making model between the four

pillars of any sustainable development (Economic, Practicality, Social and Environment)

whilst challenging the normal design assumptions, in the drive towards advanced performance

standards. These categories were given weighting factors subject to their relative importance to

the client. Each category is made up of sub-categories, which were again weighted according

to their relative importance within that category.

As Estidama 4 Pearl ratings have different KPIs weighting than LEED Platinum, this can cause

confusion on prioritizing which KPI gets the priority and at what cost. To ensure there was a

common ‘story’ and clarity regarding design, development and direction, the KPI’s and project

delivery requirements were broken down by the design team into a short list of high-level

headings that would allow a consistent and transparent cross-comparison of options throughout

the project.

KEY CATEGORY

WEIGHTING FACTOR

SUB-CATEGORY RELATIVE WEIGHTING

ECONOMY 30

OPERATIONAL COST

50

CAPITAL COST 50

PRACTICALITY 30

FUNCTIONALITY 50

BUILDABILITY 30

SPACE ALLOWANCE

20

SOCIAL 10 AESTHETICS 50

COMFORT 50

ENVIRONMENT 30

ENERGY AND CO2

40

WASTE 10

WATER 40


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SUSTAINABLE MATERIALS

10

Table 4: Decision making model

5.2.2.4- Design Strategies

The design development was directed by using the client brief requirements, and KPI’s,

including the prerequisite to achieve an Estidama 4 Pearl rating and LEED Platinum.

To enable design decisions and solution development to be informed by these multiple

parameters, the design team used the decision-making model set by the project management

team to assess each parameter’s trade-offs. For example, If there was a surplus in the budget

during the design shall they designing team go for a higher grade granite or shall they spend it

on having a higher insulated windows which would reduce the cooling requirements. By

looking at the above decision-making model, they would be able to make their judgment,

which would have the highest weighting.

Passive Design Strategies Only

In order to achieve an efficient design, the following passive principles were applied where

possible at no cost:

- The orientation of the building in order to minimize solar beam on the west and east

orientations and reduce solar radiation on the south.

- The horizontal shading for the south orientated façade, as deemed more appropriate, and

vertical for west and east.

- The maximization of the use of daylight on the north.

- The defining of the optimum building shape through the using of thermal modeling sessions

in the early stage.

-The use of the latest software technology which allowed the design team to determine the

optimum building width in order to maximize indirect daylight, thus reducing the use of

artificial lighting.

-The introduction of courtyard spaces through the design in order to provide access to views

out for the occupant.

- The development of outdoor thermal comfort through the external shading designed to

provide an increased comfort level for pedestrians and to encourage individuals to walk and

cycle around the site rather than depending on vehicle solutions.

-The use of a shadow range calculation carried out for the Masdar HQ site. The shadow range

calculation provided an understanding of the most exposed areas and also shading distribution

throughout the year.

-The use of passive cooling and natural ventilation: Prevailing breezes were studied and

investigated to determine the way that the building form or envelope could capture and

enhance these wind flows for natural ventilation of internal and external spaces.

- The utilization of traditional building techniques such as: evaporative cooling, semi-buried

dispositions, a high-mass building envelope, high albedo materials, limited and strategic

windows placement, etc.

- The use of air barriers in the envelope design to reduce air infiltration.


42

- The protection from wind and dust through minimizing the extent of horizontal surfaces upon

which dust could settle. Where this was unavoidable, material surfaces were used, upon which,

dust build-up would be less noticeable. Moving parts externally were minimized.

Active and Passive Design Strategies

Energy

The design team minimized the building energy demand through the selection of efficient

fixtures and appliances (Energy star rating) and careful selection of HVAC systems that were

appropriate to the region. A smart metering system was installed so consumers would be able

to track their energy usage in terms of monetary values, in order to raise awareness and help to

ensure ongoing energy conservation, once the project is completed.

Water

Efficient versions of fixtures and fittings were used in the project, which brought consumption

down as low as 2.5 L/min. Water efficient taps are often the same price as less efficient

models. The option, which was used, was the passive infrared sensors (PIR), which start and

stop the flow when presence is detected in front of the tap. They can also improve hygiene as

the tap does not need to be touched.

All toilets were equipped by dual Flush – these have two separate flush volumes, typically a 6

liter ‘main’ flush and 4 liter ‘reduced flush’.

All external irrigation systems were designed to be as efficient as possible, including controls

to ensure they operate in the evening, and buried irrigation systems. Soils were selected to

ensure maximum water retention rates to reduce the water demand of any planting. This was to

be further developed as part of the landscape strategy.

Another cost effective strategy was the use of a solar hot water system to supply hot water to

the office bathrooms and kitchens.

Materials and Finishes The office building design aimed to specify durable materials that have: high recycle content,

rapidly renewable content, low VOC’s, and low embodied carbon / low embodied energy

where possible. They would be locally sourced and would have been Life Cycle Assessed

(cradle-to-cradle). Materials were researched, environmental profiling was developed,

performance parameters established and benchmarking against the MASDAR Restricted

Materials List, was completed.

Low impact construction materials were investigated as a first preference in order to reduce

embodied carbon. Materials with high-recycled content and reclaimed materials were also

investigated and selected where appropriate.

Indoor Environmental Quality

Indoor conditions refer to those that are naturally comfortable and healthy for building

occupants. A combination of materials with low volatile organic compound (VOC) emissions

and sufficient air change rates to ensure decent air quality inside the building were utilized.


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Technology Integration Criteria The design team aimed to maximize the efficiencies of each adopted technology and to explore

how they worked together in a fully integrated way to maintain the levels of efficiency. As

with all complex systems, some can enhance one another when combined, and others may

counteract their benefits. This fully integrated approach was tested during all stages of the

design process. State of the art software was used continually to assess the viability of the

technologies that were under consideration, and they were cost checked during the

development process to ensure that both capital and life cycle cost effects could be measured.

Therefore it can clearly be seen that the design team followed the following steps in sequence,

in order to minimize the project cost as much as possible while achieving the sustainability

targets:

1. Adopt passive design strategies where possible.

2. Optimize the efficiency of all systems incorporated within the design - that is, use less

to do more.

3. Use an appropriate level of technology to further enhance sustainable development.

4. Understand the sustainable design rating criteria to sensibly maximize results.

5.2.3- Sample Analysis and Data Collection

The questionnaire above was first sent via email to all the Masdar Headquarters Building

project’s stakeholders to prepare them for the face-to-face interview. The list of stakeholders

included the client representative, the architect, the quantity surveyor and the contractor’s

project manager. All of the selected interviewees are LEED certified and they have all

previously been involved in LEED certified projects. Therefore they all have a strong

foundation and depth of knowledge concerning green building construction, and have the

professional capability to advise on the designing of environmental friendly buildings. With

their experience in planning, tender and procurement, construction, and commissioning of

green buildings, it was evident that they would be able to provide comprehensive inputs on

designing and delivering green buildings cost effectively.

5.2.4- Discussion

All the interviewees agreed to the fact that green buildings are not necessarily more expensive

than conventional ones if they are executed well. They also supported the view that every

building is unique in itself and that there is no one solution that fits all. For example, there are

buildings that can achieve gold LEED rating at no cost premium while others add something

between 5 % to 10 %, as a cost premium.

The reason for this, according to the design consultant is the fact that most clients look at

sustainability objectives as ‘add-ons’, which can be added to any architecturally beautiful

building. This can limit the optimization of most of the passive green design strategies and

instead create a reliance on more active green solutions, which in turn can lead to an increase

in the project cost. Another reason that was given for an escalation in green building costs was

in the case of a very complex project such as a metrology lab which has substantial, restrictive

requirements such as the acceptable vibration level, noise level, electric wave exposure, and so

on, while trying to be sustainable at the same time.


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In the Masdar Headquarters building, the client aimed to achieve specific sustainable

objectives early in the project, which were included in the design brief sent out to the selected

designing firm. This motivated the designing consultant to resource himself with the right

LEED certified architects and project team to work on this project, especially as Masdar was

adamant about not exceeding the budget of 7000 AED/sqm which made the task even more

challenging, but also forced the team to become more innovative.

The design consultant also added that the relationship between the urban plan context and the

building could also influence the overall cost of the project. For example, the plot size, shape,

orientation and the master plan density can influence the building envelope, and the natural day

lighting balance with the solar gain. This can lead to an increase in the level of technology

which is used to supplement any site deficiency.

The client representative for the Masdar HQ building has also emphasized the positive impact

that the master plan for Masdar city has had on the Masdar HQ building overall cost. He stated

that, " Masdar HQ has got many points, from day one, by just being in Masdar. For example,

Masdar gets higher points for using a water-based district cooling which was provided by the

master developer. Another example was the ‘Electrical Vehicle’ designated parking with

charging capability which was also provided by the master developer".

On the management level, according to all interviewees, failure to define the project green

objectives at the early stage was the major cause of increasing the green project cost. As the

design consultant pointed out, that most clients are focused on the architectural features of the

building rather that the sustainability ones. This is understandable according to the architect,

who highlighted the fact that the architecture of a building is more marketable than its

sustainability, especially when the project is set on a prime plot (for example: with a sea view).

The architect explained that in this case, the building owner or developer would try to

maximize the exposure to the sea view by using more glass for the building regardless of its

orientation. This can subsequently result in an increase in the heat gain of the building and

therefore, on its air-conditioning requirements as well.

The client representative for Masdar HQ building also added that some owners tend to exceed

the sustainability objectives in the wrong way. He said that, “most of the clients try to make

sustainability more marketable by adopting more expensive technologies which can increase

the project cost by much, for example, using smart sensors and untested technologies such as

crystalized window tinting technologies." In the case of Masdar Headquarters building, he

stated that the owner was very keen to achieve the greatest amount of sustainability targets

with the minimum investment. He explained that this could only be achieved by emphasizing

the innovative passive strategies the design consultant could apply which could only happen by

selecting the right team members for this project and clearly outlining all the constraints at the

beginning of the project.

The way the project is procured is another strategy, which can reduce the green project’s

overall cost according to the contractor’s project manager. He stated that Masdar HQ was built

below the present budget due to the better integration between the design and the execution.

This was only successful due to the ‘design and built contract’ which allowed the contractor to

be an integral part of the design team and provide his views on a design scheme, which would

reduce the complexity of the building and the use of expensive technologies, especially by

trying to maximize the passive solution in the design stage instead. At the Masdar

Headquarters building, the design and build contract started on the schematic level rather than


45

the concept level. He stated that most clients like to control the concept design stage and would

allow them to get comparative prices from all bidders for the Design and Build stage.

In regards to the design fee for green projects, the design consultant stated that green building

designs cost more than those for conventional buildings (around 10 % more than the

conventional design fee) due to the extra activities needed for green buildings. These activities

include site analysis, building modeling and the higher amount of research needed for green

projects to define the most efficient materials and technologies to be used. The recording level

and the documentation is more extensive and important for any green projects seeking to be

certified. The certification process is another cost element for the designing consultant. In

saying that, the consultant also highlighted the fact that more LEED architects are available

nowadays and it is becoming trendy to be associated with LEED. Therefore, most consultant

firms are not paying any extra for LEED certified architects compared to the past.

The design consultant also stated that using different rating systems can also increase the

project’s overall cost as different rating systems use different weighting for their sustainability

KPIs. This variance in weighting among different rating systems is due to the importance of

the different problems they are trying to solve. For example, in the table below, LEED places

more emphasis on reducing the power demand than Pearl, whereas Pearl emphasizes much

more significantly the reduction in water demand. As LEED was initiated in the US, it is

understandable that power is a major concern in there compared to water, which they have in

greater abundance. Conversely, in the UAE, where the Pearl rating system originated, water is

a much more scarce resource than sources used for energy. Consequently, reducing water

demands is a higher priority.

KPI LEED Weighting Estidama Pearl Weighting

Energy 24.5% reduction in energy demand

16% reduction in energy demand

Water 5.5% reduction in energy demand

25% reduction in energy demand

Using a multi rating system like that used for the Masdar HQ building can make the process

more complex, and more difficult for the design team to balance and trade off between

different KPIs. Ultimately though, the reason the owner requested LEED platinum Certificate

and Pearl 4 for the Masdar Headquarters Building was purely a marketing one.

Another design concern which can increase the design cost, but in contrast, reduce the project

cost at a greater value is the ongoing research regarding the latest green materials and green

technologies. These are being developed and modified on a daily basis, and an increasing

number of efficient green products are being released into the market, and at lower costs. The

cost consultant also stressed the fact that a green building owner needs decide on how

important the long term benefits are to him. He said that some developers, especially the

speculative ones, are keen to keep their project cost at the bare minimum to increase their exit

margin, while other developers are intending to retain the asset for a much longer period of

time and are looking at the cost of the product life cycle rather than the project life cycle.

In the case of the Masdar Headquarters building, the owner will retain the ownership of the

building which therefore has meant that a greater emphasis was placed on the operational cost,

even if it in turn leads to an increase in the project cost. The quantity surveyor was mandated to

produce a quarterly market research report on the newest green technologies and their relation

to reducing the product life cycle cost, using financial tools such as Net Present Value (NPV).


46

When asked whether green buildings cost any additional premium over the conventional ones,

answers given by the quantity surveyor differed to those supplied by the contractor. The

quantity surveyor stated that LEED Gold buildings can cost an additional premium up to 10 %

compared to similar conventional buildings. However, when the same question was asked of

the contractor his answer was that LEED certified buildings, and in some occasions Silver and

Gold LEED buildings will cost little more (not more than 2%) or nothing than conventional

ones. However, this was dependent on the contractor being involved early in the development

of the design. This difference in views can be due the familiarity both parties have in

developing green buildings. When the quantity surveyor was asked on how to estimate the

project cost in the design stage, he stated most of QS firms just add an additional 10 % cost for

the green element. This explains the resistance to go green by many developers as most of

them focus on the initial investments rather than the long term benefits. Such misleading

feedback concerning automatically assigned higher green building costs can act as ongoing

deterrents to any green initiatives that the client may aspire to have.

In the case of the Masdar Headquarters building, the contractor stated that they were able to

reduce the initial projected project budget due to the fact that they were scoped to develop the

concept design further in a design and build contract. This allowed him to input may beneficial

suggestions on how to achieve the green objectives of the project, in a cost effective way.

Another interesting comment that the contractor made that has not been mentioned in any of

the literature that was reviewed, was the importance of the relationship that the contractors

have with the vendors and suppliers of green products and technologies, and how it can affect

the green building cost. The relationship that a contractor has built with such vendors and

suppliers can qualify him to much greater discounts compared to the published costs of the

products and technologies. This is because most contractors are major clients of these suppliers

and vendors who maintain their competitiveness in order to retain them. Most QS firms and

designing consultants on the other hand, do not have access to these discounted prices and so

include the full published costs in their projected, project budgets.

This has also raised the question about the maturity of the supply chain market on the project

overall. In the responses, there was general agreement that the more mature the market is, the

more new technologies and green products will be available, and at very competitive prices.

However, all the interviewees stated that the UAE market is lacking sufficient green products

suppliers and vendors. This could change in the future as market awareness of green projects

and their benefits, increase.

The contractor also addressed another factor which can reduce project costs; that is, by finding

an experienced project manager in building green projects. He said that the management of

green projects is more complex than managing of conventional ones, including the level of

communication that is required. Consequently, such a project manager needs to have an

additional set of skills over and above the average project manager, especially in the absence of

any green project management frameworks compared to conventional project management

frameworks such as PMI and PRINCE 2. He also stated that in the construction industry there

is a very limited number of experienced green project managers compared to the design

consultancy firms. Apparently, securing the services of a good project manager with

experience in building green projects can be a bit challenging, according to the contractor, and

can result in an increase in the soft costs of the project. However, he pointed out that as more

green buildings are built, then the number of experienced green project managers in the market

should increase.


47

5.2.5- Limitations

The sample size was limited to one case study. In the future, when more green projects are

being built in the UAE and their data is available, then another study will be very beneficial to

structure a best practice model, which can be applicable in delivering a cost effective green

building.

Another limitation was that this study was limited to the UAE and further studies in the GCC

countries would be needed especially as they share the same social requirement and expose to

the same climate challenges.

One last limitation was that the method used in this dissertation was for commercial green

buildings. Therefore, further studies will no doubt be needed to examine other green buildings

types in the future.

6- Conclusions and Recommendations

6.1 Conclusions

The main aim of this study was to determine whether green buildings cost any additional

premium over conventional buildings, and if so, how much that would be. There were many

study reports and articles about green buildings in the literature review, which was carried out

during the preparation of this dissertation, which talked about the long term benefits of green

buildings and how their initial investments would pay off within a certain period of time, once

the building was in operation. However, the amount of literature, which specifically addressed

the claim that green buildings cost more than conventional ones, and identified this cost

difference, was very limited.

The study reports and articles that did talk about the initial costs involved in green building

design and construction, revealed some contradicting conclusions. Some of the literature

supported the fact that green buildings do not necessarily cost any additional premium over

that of conventional ones, if carried out correctly. In contrast, other authors of the literature

reviewed, claimed that green buildings do, and would cost more than conventional ones. They

also asserted that the premium rises with the level of certification from 5% to as much as 20%.

Naturally, these conflicting results have continued to cause misunderstanding and uncertainty

around the area of sustainable building design and construction, and also they have acted as a

barrier to any serious attempts to transform the real estate industry into a green one. These

concerns have not only been raised by private investors, who make up the majority of those

with green building issues, but even by the government sector which makes this matter a

serious one.

To assess these claims in the context of the UAE, two methods were adopted:

Method one involved the examination of the cost per square meter of two green buildings with

two similar conventional ones which hadn’t considered any green objectives specifically. This

comparison included the construction costs (shell and core), the HVAC (excluding air

conditioning as the green buildings are tapped to a centralized district cooling plant), the

finishing of public spaces, and above or underground parking spaces. On the other hand, it

excluded the design fee, the land price, and the cost of the finishing items. All the buildings,

which were selected, had been built around the same period (2008 to 2014) to make the


48

comparative study more valid. However, both the green buildings were procured as a ‘design

and build’ after the concept design, while the other two conventional buildings were procured

traditionally (design-bid-build).

Method two involved the interviewing of all key stockholders in the Masdar Headquarters

Building (which is the case study being used for this dissertation). The aim of these interviews

was to investigate the methodology that had been used to complete the green project (Masdar

HQ building) successfully. The questionnaire that was prepared for the interviewees and the

subsequent interview discussions attempted to identify any different cost elements in the

design and construction of this green building, along with the practices that been adopted to

ensure the cost effectiveness of the green building.

Using these methods enabled a deeper understanding to be gained on the initial cost of green

building in the UAE. From the outcomes of the comparison in method one, it was clearly

evident that green buildings do not necessarily cost any additional premium over conventional

ones. In fact, one of the green buildings cost less than the conventional ones even though it was

a LEED platinum. The results of this comparison is similar to some of the findings of the study

reports and articles in the literature review and therefore claims about green buildings costing

more seem to be both subjective and localized.

In order to analyze this issue in greater depth, the Masdar Headquarters building was chosen to

be investigated further in order to understand the reasons which had enabled this green project

to not only be delivered below budget, but also to achieve the lowest construction square meter

rate among the four buildings in the comparative study, even though the project was LEED

platinum and Pearl 4. Method two was employed to achieve this aim.

A number of key people representing the different groups involved in the design and

construction of the Masdar HQ building were selected for the investigative interview. The list

included the client representative, the architect, the quantity surveyor and the contractor’s

project manager. All of the interviewees are LEED certified and they have all previously been

involved in LEED certified projects. Consequently, the interviewer knew that he was dealing

with people who had a sound knowledge of the green building industry and the experience to

go with it, plus the professional capability to scrutinize and advise on the cost elements

involved in designing and building environmental friendly buildings.

The research questionnaire in this study was compiled after undertaking a content analysis on

the relevant information in the literature review, which examined the cost premium of green

buildings. This interview questionnaire was then modified so that it could identify, from a

management perspective, some of the challenges and obstacles faced at this level in relation to

cost. Additionally, it would help to gain a more comprehensive understanding of the

management culture adopted in delivering the Masdar Headquarters Building, and how it

related to the project’s cost efficiencies.

Results from the interviews revealed that there are some key success factors which led to the

successful completion of Masdar HQ building, and in the most cost effective way. The main

key success factor, which helped reduce the project cost, was that the owner had decided

explicitly ahead of time, to achieve clear green objectives. This was part of the design brief that

was given out to consultants before they bid. These clear objectives made it possible for the

design consultant to assemble the right design team for the project, especially as the maximum

project cost was not allowed to exceed the AED 7000 per square meter mark, which was the


49

mid market rate used for a similar grade conventional building. By having the green objectives

set ahead of time along with the budget, the additional costs that usually result from adding on

green features and technologies at a later stage were avoided according to the interviewees.

Another key success factor, according to the interviewees, which helped keep the project and

its budget on track, was the connection with the master plan. Some master plans can lead to an

increase in project costs irrespective of whether they are conventional or green. For example,

as part of its design guideline, a master plan can dictate that underground parking must be

provided. This would then to an increase the project cost, power demands and ventilation

requirements. In contrast, another master plan could allow a developer to install an over-

ground parking area which would mean that natural ventilation and light could be used, and the

underground excavation and building costs eliminated. In relation to the importance and impact

of the master plan on the project and budget, there is no real difference between green and

conventional buildings. Both building types can increase or decrease in cost with changes to

their master plans. For example, in the case of the Masdar HQ building the master developer

provided all the buildings with a highly efficient water-based district cooling system which not

only reduced the project cost, but also allowed them to get credits from the master plan for that

too. The master plan can also state the plot shape and orientation which can help maximize the

passive strategies for a green project.

Another important factor that can lead to a reduction in project costs is where there is a better

integration between the design and the execution teams, as happened during the Masdar HQ

building project. This higher level of cohesion between the two teams was possible due to the

procurement type which was used. For example, the Masdar HQ project client hired a design

consultant to design the project up to the concept design stage. The project was then procured

again as a design and build contract where the contractor developed the design further. This

allowed him to interact with the design team and share with them, his views and knowledge on

how to achieve the given sustainable objectives, cost effectively. This procurement method

incentivized both the consultant and the contractor to deliver the project at the minimum cost

while achieving the clients’ green objectives.

Allowing enough time to do research into the latest high performing green technologies and

products can also help to reduce these costs as the market keeps evolving with newer and

higher performing technologies coming on stream at very competitive prices. As for the UAE

market, the availability and range of green products and technologies are not nearly as prolific

as can be found in Europe or the US. Consequently, the prices of these green items remain

relatively high, especially as the number of suppliers and vendors in the UAE are also very

limited. Despite this situation, cost savings can be achieved by using large and reputable

contracting companies that are able to buy these products at discounted prices through their

relationship with vendors and suppliers.

Although the interviewees were able to identify a number of key factors that lead to the cost

effective construction of the Masdar HQ building, they also pointed out several areas where

costs can escalate rather than decrease. One example is that most consultants and contractors

incur more soft costs on green projects than conventional ones (around 10 % more than the

conventional design fee) due to the extra activities needed for green buildings. An example of

this the extra work required in the site analysis and building modeling. Also, green projects

usually require a greater amount of time spent in research in order to determine the most

efficient materials and technologies to be used. Additionally, more time and skill is required to

meet the higher level of record keeping and documentation for any green projects seeking to be


50

certified. This certification process is another cost element for the designing consultant. On the

positive side, the design consultant who was interviewed highlighted the fact that there are now

more LEED architects who are available in the market place, especially as it is now coming to

be seen as advantageous to be associated with LEED. Consequently, many consultant firms are

now not paying any extra for LEED certified architects compared to in the past.

Unfortunately, this is not the case for contractors in the UAE. Finding an experienced project

manager in green buildings is very difficult and subsequently, most contractors end up having

to pay extra to secure their services. Any additional cost involved in employing such a project

manager is considered worth it as it is a crucial role in the project. The project manager has to

manage all aspects of the construction process, including the budget, which is very challenging

given that green projects are more complex to manage than the conventional ones. To

complicate matters further, there is a lack of green project management frameworks compared

to conventional project management framework such as PMI and PRINCE 2 which can be

used.

Another additional cost factor that was noted by the interviewees in relation to the Masdar HQ

building was in the area of sustainability certification. While it was commendable that the

Masdar HQ project aimed for more than one green certification, it did mean that the difference

in the weighting between those systems increased not only the soft costs but also the hard

costs. This was partially due to the difficulties that the design team faced when trying to trade

off between the various green objectives, depending on their weighting, which meant that in

most situations they ended up relying on more active and costly solutions.

In conclusion, the key significant finding of this study showed that green buildings in the UAE

do not have to cost any more premium than conventional ones, if they are probably designed

and managed from the start. Many of the claims made about the higher cost premiums of green

buildings appear to be driven mainly by one or more of the following reasons as per the

literature review and interview feedback:

- Many private real estate developers in the marketplace are perpetuating the myth that green

buildings cost more than conventional ones without any validation; it is often based on what

they have heard or on very old studies where the technologies were more expensive.

- Most of clients look at sustainability objectives as add-ons which can be added at a later stage

to any design, which limits the optimization of economical passive green design strategies, and

instead promotes a greater reliance on more active green solutions which can lead to an

increase in the project cost.

- Some building project involve much more complex designs and structures as in the case of a

metrology lab which has very restrictive requirements in relation to certain elements such as

vibration level, noise level, and electric wave exposure, and so on while trying to be

sustainable as well.

- Some master plans can escalate project costs due to various aspects such as the size or shape

of the plot, or its orientation not being optimum for green buildings.

- Most clients are initially and primarily focused on the architectural features of the building

rather that the sustainability ones. This usually means that the green objectives of a project are

not clearly defined at the early stage which is a major cause of increased green project costs.


51

- Many projects use traditional procurement strategies that are not the best fit for green

building projects. For example, the ‘design-bid-build’ approach does not provide the

opportunity for inputs from the execution team during the design stage, which can increase the

project cost and lead to some design changes.

- Most green project designs cost more than conventional ones, in general, due to the extra

activities needed for green buildings. These activities include: site analysis, building modeling,

greater amounts of research into defining the most efficient green materials and technologies to

use, increased recording and documentation levels for sustainability certification, and the

certification process itself.

- Multi rating systems can increase green project costs. By using more than one rating system,

as in the case of the Masdar HQ building project, both the soft and the hard costs can increase.

It can also make it more complex for the design team to balance the trade off between different

KPIs and lead to a reliance on more active strategies.

- Many green project teams lack the necessary information regarding green products and

technologies due to a lack of research and, or, availability of such information. Consequently

they do not always have access to these items at more competitive prices or greater cost

efficiencies. Additionally, there is also a lack of green product suppliers and vendors which can

keep the cost of such products much higher than in other parts of the world where there is

greater supplier competition.

- Many architects and building consultants are still not familiar with how to design green

buildings, or they are too comfortable with the way they are doing things at present.

- Many contractors are adding an inflated risk premium to their project estimates due to their

lack of experience in constructing green projects.

-Many of the current green buildings are designed to be a showcase and rely heavily on using

cutting edge technologies in those buildings, or they have been designed as iconic

constructions, which have increased their project cost.

Although the lack of knowledge and competency in green building design and constructions

can contribute to the increase costs of green buildings, the study did reflect an increase in

awareness amongst consultants and contractors concerning the cost of green projects, and more

of them are coming to see that green buildings do not necessarily require any risk premium,

especially in the UAE.

The literature review, however, did reveal some contradictory results where one study

concluded that green buildings might cost an additional premium up front, but in the long run

they would save so much on operational expenses, that it would significantly outweigh the

additional, initial investment cost. In contrast, other research results supported the premise that

green buildings do not need to add any additional cost to a building project, if they are

designed and constructed well, such as through the kind of strategies outlined below in the

recommendations of this thesis study.

Finally, the results of the case studies used in this thesis study, confirmed that there was very

little difference between the final cost of the two green buildings, up to the core and shell stage,

with that of the two conventional buildings that were built in the UAE, at the same time. In


52

fact, both the green buildings, the Siemens Headquarters, and the Masdar Headquarters, were

built under the estimated budget, as were the conventional buildings. The Masdar Headquarters

building actually cost the least amount of all four buildings despite some of the stringent

sustainability requirements it had to meet as being part of the Masdar City Development.

6.2- Recommendations

Recommendations regarding the development of green buildings in the UAE, or elsewhere,

which were derived from this study, can be summarized as follows:

- Define the green objectives early in the project and explicitly mention them in any design

tender document with a well defined maximum budget.

- Understand that the interrelationship between the project and the master plan can help or

hinder achieving the project targets in a cost effective manner.

- Ensure that there is a well managed and careful integration between all those involved in the

project team, especially during the design stage, is absolutely vital if the overall project cost is

to be controlled.

- Use a design and build procurement strategy to improve the communication between the

exception? team and the design one which will provide a cost effective solution for achieving

green objectives.

- Adopt passive design strategies, where possible, in order to keep costs down.

- Use one rating system if possible, and make sure that, that system addresses the major

concerns.

- Allow enough research time to find the most cost effective and efficient green products. And

use an appropriate level of technology within a realistic pricing structure to help make even

greater gains in sustainable outcomes.

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